Is the Australia I once knew gone for good?

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When I first started writing about the Australian property bubble in 2003 I knew it was big. But even I didn’t think it would reach its current absurd proportions. The bubble has now engulfed not just our economy but our politics, our media, our social structure and entire strategic outlook. Not one of these is defensible in terms of the national interest but together they converge on Australian disintegration:

• The economy is now a hollowed out wasteland of finance, speculation and consumption. Other than dirt, we do nothing else.

• Politics is now warped completely around the bubble with elections won and lost on house prices alone. Policy is forgotten.

• The duopoly of Australian media is focused entirely on maximising for sale listings for Domain and realestate.com.au. It has become a bald-faced real estate propaganda machine.

• Multi-culturalism is being increasingly strained as immigration is sustained at economically destructive levels purely to support house prices.

• ANZUS is now fundamentally undermined by the “citizenship exports” sector that drives house prices and construction and brings with it a “hard-edged” Chinese soft power push.

The Australia that I grew up in was based upon the principle of the “fair go” balanced against a vibrant and mixed competitive market economy, of policy made in the national interest, of successful multi-culturalism within a liberal Anglosheric context, and of unshakable faith in the US as our strategic partner in the world.  Now, thanks to the bubble:

• The “fair go” is dead.

• The US alliance is dying.

• Multi-culturalism is under assault.

• Liberalism and the market economy have been subsumed by specufesting.

Crazy housing prices still, down under

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Successful bidder, Robert, and his family celebrate after the auction.

Turning off even the most willing first home buyers was the $1.510 million sale of the 40-year-old unrenovated one-bedroom apartment at 6/166 Queen Street, Woollahra, in Sydney's eastern suburbs on Saturday morning.
The 70 sq m apartment broke the suburb record at $21,571 a square metre and its auction attracted the who's who of the eastern suburbs.

Banks paying you monthly interest on your mortgage while you stay in it

well, I'll be.... 

http://www.wsj.com/articles/the-upside-down-world-of-negative-interest-rates-1460643111

AALBORG, Denmark— Hans Peter Christensen got some unusual news when he opened his most recent mortgage statement. His quarterly interest payment was negative 249 Danish kroner.
Instead of paying interest on the loan he got a decade ago to buy a house in this northern Denmark city, his bank paid him the equivalent of $38 in interest for the quarter. As of Dec. 31, his mortgage rate, excluding fees, stood at negative 0.0562%.
MEET HANS PETER CHRISTENSEN AND HIS FAMILY

• Purchase price of their home in Aalborg, Denmark: 1.7 million Danish kroner ($261,000)

• Mortgage rate: -0.0562%

• Quarterly interest payment: -249 Danish kroner (-$38)

• Realkrdit Denmark, one of the nation’s largest home lenders, provided 758 borrowers with negative interest rates last year.

It has been nearly four years since Denmark entered the world of negative monetary policy, and borrowers and lenders alike are still trying to make sense of the upside-down world it has brought.
“My parents said I should frame it, to prove to coming generations that this ever happened,” said Mr. Christensen, a 35-year-old financial consultant, about his bank statement.
Denmark isn’t the only place where central bankers are experimenting with negative rates. The European Central Bank and the Bank of Japan, grappling with stagnant economies, are using subzero rates to stimulate growth. Switzerland and Sweden, like Denmark, are trying negative rates to keep their currencies in line with the struggling euro.

Owning a fraction of house - the new economy

http://a16z.com/2016/09/13/point/

Fractionalization of real estate has already occurred in australia. To me, I feel it is a monstrosity.
This is not helping younger people to own property.
But rather aiding the ability of the older/richer people's increasing share/ownership of the real estate and artificially inflating the price of property and preventing it from dropping despite the much anticipated rate hike (if it happens and it will be gradual anyway).

For the longest time, there have been two ways of “living” somewhere:

• Renting, in which case you own 0% of your residence

• Owning, in which case you own 100% (typically using a bank mortgage as a 30-year crutch to owning all 100%)

But why not own 91% of your house? 95%? 87%? Home ownership rates have been falling, partially because millennials can’t afford to buy homes — and when/if they can, they might find 300% of their net worth concentrated in a single asset class (i.e., the exact opposite of diversification) — their house.
There’s no such thing as a free lunch, and in this case Point’s lunch comes in the form of capital appreciation (more on the historical magnitude of this in a bit). If the house appreciates in value, Point shares in that upside. If the house depreciates in value, Point gets paid back after the bank, but before the homeowner, in the event of a sale. If the property depreciates enough, Point may lose some of its money, without the homeowner being in default; on the flip side, if the house greatly appreciates in value, Point will make far more than a traditional “coupon” from a mortgage. This type of equity-like exposure creates alignment between the homeowner and investor. There’s a terrific article on this subject in this Wharton article, “Don’t Reform Housing Finance — Reinvent It“.
On the opposite side, imagine you’re a big investor looking for capital protection and appreciation. There are few asset classes that have outperformed super-prime real estate in the last 60 years. Consider that the median home in Palo Alto sold for less than $20,000 in 1956, versus $2.5 million today — an appreciation rate of 12,500%. Compare that to an approximate 5000% return for the S&P 500 over the same period (much higher with dividend reinvestment, but you’d need to pay taxes on said dividends, making this calculation challenging).
Of course, for an investor to invest passively not in a single house but in a broad basket of homes would have been challenging, if not impossible. The investor would need to deal with finding and serving tenants, paying annual real estate taxes, and fixing toilets (maintenance) … across many, many properties.
Using technology, Point brings diversification to residential homeowners (diversify out) and investors (diversify in). It’s not like a home equity line of credit (HELOC) or a mortgage with monthly payments; it’s an aligned investment — that is, equity. It’s rethinking the fundamentals of residential real estate ownership — making single-family residential real estate a liquid, tradeable asset class.

Reflexivity in REITs for example

Farmland investing in the US

buffett on farmland in 2011 when commodities were at highs.

“Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.”

related: SMK's water label

https://www.tiaa.org/public/performance/market-commentary/market_commentary_articles/articles/mc_187.html

Planning for water shortages before a drought
Pests and weather pose risks to crop yields, but a season or even a few seasons of drought should not have a long-term impact on farmland investing. Many farmers have successfully managed droughts, pests and floods. Drought is a well-understood, age-old risk that can be planned for and mitigated, especially in short time horizons. The current drought is an excellent case in point. TIAA owns multiple properties in California across more than 37,000 planted acres, and as part of the property acquisition process, the stability of the water supply is always a primary focus of due diligence. This review includes research on the following water-related subjects:

• Historical rainfall levels, patterns, and distribution

• Availability and stability of the underground aquifer in the area of the property

• Availability and reliability of surface water from state, federal, or local water districts

• The willingness of water districts to work with land owners to buy, sell, and store water

• Availability of banked water supplies (water stored or “banked” underground)

• Presence of “excess” land with water rights that could be used for the benefit of permanent crops

Where possible, TIAA seeks to acquire properties with multiple sources of water, such as reliable groundwater wells that are supplemented by the right to receive surface water from water districts. Properties that are not serviced by water districts or other surface water rights are located in areas with historically reliable ground water supplies. Furthermore, advanced planning for those properties that typically receive most of their water from water districts, which are likely to have no supplies available in 2014, is required to ensure access to and availability of banked water. When droughts linger, however, they may cause problems for all farms—no portfolio is immune from a long-term drought. The current drought has demonstrated the value of planning for short-term water shortages.
In addition to acquiring land with fundamentally strong water supplies, actively managing farms may offset, to the extent possible, the impact of drought conditions. Strategies to accomplish this may include the installation of water-conserving technologies such as drip and micro-sprinkler irrigation systems; acquiring and banking water when possible; and winter transfers of underground water to above-ground storage to make the water more readily available to the farm during dry periods.

A long-term view of farmland investingLooking back at the 2012 drought across the U.S. Midwest, it is important to note that the drought impacts had no material negative impact on farmland values, and similarly we expect minimal long-term impacts for our California investments. This does not mean the danger of droughts, pests and floods are to be ignored; indeed, planning for these hazards is critical to maximizing returns and managing farmland investment risk. The longer a drought persists, the greater the potential for material impacts to any farmland portfolio. TIAA’s long involvement in farmland and deep connections within the agriculture industry provide us with the experience and expertise to properly analyze these risks, which fall outside the traditional realm of financial markets. We believe that farmland is among several private investments in real assets that offer the potential for competitive risk-adjusted returns, a hedge against inflation and improved portfolio diversification.

http://s.giannini.ucop.edu/uploads/giannini_public/1d/ab/1dabb1ff-3f32-4e16-8340-b7c2a1403e76/v15n1_3.pdf

Farm real estate remains the most direct method of investing in the agricultural sector. In recent years, the agricultural sector has provided consistently positive returns as a result of high commodity prices and rising farm income levels. The success of the agricultural sector has led to increased attention from investors outside of the traditional agricultural finance sector. 

http://www.zerohedge.com/news/2016-08-13/california-farmland-overvalued-70bn

The plan was relatively simple, in the absence of attractive fixed income yields, large asset managers (like TIAAmentioned above with $850BN of AUM) decided to purchase hard assets like farmland instead.  Farmland could then be planted with the highest value crop, which just happens to be almonds in California, to drive attractive ROICs on invested capital.  A few simple charts illustrate perfectly how the story played out. 

          Per the chart below, planted almond acreage in California nearly doubled from 2003 - 2016...  

We don't know about you but we're not sure about underwriting California farmland to a 4% return particularly in light of that "minor" little drought issue they're facing.  We would be looking for ROICs closer to 8% - 10%, at a bare minimum, which, at current almond prices, implies that acreage needs to come down around 45%-55% from the $35,000 per acre level.  

But the story doesn't end with almond acreage which only represents about 1mm of the total 8mm acres of irrigated farmland in California (see data from the United States Department of Agriculture).  So if we assume that California's 8mm acres are worth $25,000 per acre on average that implies roughly $200BN worth of farmland in total.  Now, even if that number is only inflated by 35% (and not the more draconian 45%-55% we suggested above) it implies that farmland owners, many which are New York institutional buyers, in California alone are sitting on $70BN worth of losses.

roller coaster for chinese property company investors

link

Another surprise investor burst onto the scene this month. Evergrande, a rival developer run by billionaire Hui Ka Yan, said in regulatory filings that it had amassed a 5 percent stake as of Aug. 8. It cited Vanke’s “strong” financial performance for the purchases, without providing further detail on its motives.

Sell-side stock analysts have mostly stuck with their positive recommendations on Vanke as the drama played out. For both the mainland and Hong Kong shares, a majority of analysts tracked by Bloomberg have a rating equivalent to buy or hold.

It’s been a roller-coaster ride for investors. Vanke’s shares in Shenzhen plunged almost 30 percent in the four weeks through Aug. 1, playing catch up to Hong Kong as the six-month trading halt was lifted. The stock reversed its slump this month, surging 24 percent on news of Evergrande’s purchases.

comments on ak Saving money with good deals is common sense but...

https://singaporeanstocksinvestor.blogspot.sg/2016/07/saving-money-with-good-deals-is-common.html
https://www.blogger.com/comment.g?blogID=7944902213075756335&postID=51588254263444376&page=1

how about buying a property right now in July 2016 with a lump sum (via a loan with interest) and collect future rentals? 

Question: If the supermarket told you that you could buy more of a special deal item but you could only collect one now and the rest on a monthly basis in future, would you bite?  

The Changing purpose of Malls: from Retail to Purpose driven

This is my comment on  http://www.turtleinvestor.net/retail-reits-an-unique-sg-story/

nice one.
the key difference is location and transportation.
catchment areas for malls in singapore and public transportation is very different from other countries and big countries.
hence they can serve multipurpose. i agree with your post.
btw kyith, this is what I meant by "I think there is a case for a entry in REITs when you notice a changing mix in malls."
http://investmentmoats.com/money-management/dividend-investing/buy-crap-reits-investment-properties-fundamentals-bubble/#comment-168211

Indonesians malls have similar catchment areas but damn the public transport and their shopping schedules.
US malls have problematic catchment areas and transport too.
interestingly, amongst the places I visit, I found conditions in Hong Kong and Guangzhou more similar to Singapore.

key points.

• Tech SavvyMalls will need to remodel to focus more on food-and-beverage outlets, entertainment, services and banking, and less on fashion and consumer products.
  It has already been the case. Only realizing it now? “Late” is an understatement.
• Closing StoresMarks & Spencer, Zara, New Look, Celio etc.
  Brands like Uniqlo and H&M are doing quite the opposite. Once again, it is a matter of where?

Threat Of Shopping Online
The impact of online shopping cannot be neglected, and the direct impact falls on retailers whose products and services can be easily replicated online. It is not difficult to notice that changing tenant mix of malls in recent years.
Based on my memories, the most adversely impact retailers include those dealing with music and video (remember CD shops? Poh Kim DVD?). The deadly combination of online shopping and high-speed internet literally killed them off. 

Rent in United States: it's too damn high!

In Brooklyn New York, rent costs 49.9% of your typical household income. 

In Singapore, buying a home (as long as you don't overbuy) costs less than a couple's combined CPF-OA account.

https://www.washingtonpost.com/news/wonk/wp/2016/05/25/how-much-a-decent-apartment-costs-you-in-every-county/

Singapore property coming to a junction

Many challengers to the property sales business in Singapore and in the world.

Fundamental

Changes in Proptech

On the fundamental front, you have the pioneers in proptech: propertyguru and iproperty.
The 'ebays' of property sales in indirect listing .

then came the airbnb which showed what could be possible: the amazonian direct sales of rentals.

so next came 99.co for the own-use and emotionally feely and theedgeproperty.com for the more investment inclined.

Macroeconomic 

Then you hit the long term debt cycle deleveraging. And the prospect of higher interest rates with goverment regulations on debt ratios.

Microeconomic 

And you have the singaporean economy slowing down. Back in the 1990s, Singapore government bet big on IT and biotechnology both of which sectors proved to be very profitable worldwide.
Except Singapore IT mired itself on big corporate IT instead branching into startup-style unicorns.
and Taiwanese manufacturing profited greatly from Apple's promotion of smartphones so Singapore got passed over for close to 10 years from the smartphone boom.

Hence, you got income inequality because a huge segment of the people didn't prosper.

Property prices rise if people want the property.

If they don't, then...

from: http://www.straitstimes.com/business/property/lifting-curbs-not-key-to-property-sectors-outlook-lawrence-wong
Mr Wong said he knows the industry is "fixated" over the measures, but the key issue is for the country to grow and remain a successful global city with a thriving economy over the next 10 to 20 years. "If we stagnate, if we decline, if we are unable to sustain growth in the economy, if we cannot retain our position as a global city, then you can be sure that the property market will be in the doldrums even if we lift the cooling measures," he said.

HDB Property Inheritance Rules

Qn: If a man already owns/co-owns a HDB property, will he be forced to sell his HDB house if his parents wills their HDB property to them upon their deaths?

Ans: A person who owns an HDB flat is not allowed to take over the ownership of an inherited HDB flat as he is unable to hold 2 HDB flats at the same time.

Qn:  If a man already owns/co-owns a private property, will he be forced to sell one of his houses if his parents wills their HDB property to them upon their deaths?

Ans: Generally, for a Singapore Citizen household, as a private residential property owner, they can take over an HDB flat which has already fulfilled its minimum occupation period without disposing the private property. However, they are required to physically occupy the HDB flat.